Home price index shows growth in second quarter

The latest Integrated Asset Services House Price Index found the second quarter of 2011 had an index increase of 2 percent, with all four census regions showing gains.

The south reported a 3.1 percent increase, the Northeast and Midwest gained 2.5 percent and the West grew 0.1 percent. Of the nine census divisions in the nation, seven reported gains with the West South Central division showing the greatest growth of 4.7 percent. Overall, the U.S. home price index has reported a 1.3 percent growth for the last 12 months despite a weak economy and poor consumer confidence.

Paul Sveen, CEO of IAS, said the sale process of distressed properties and foreclosed homes, which accounted for about one-third of home sales in 2010, needs to be improved.

"The longer it takes to put the foreclosure-processing issues to rest, the greater will be the backlog of properties," Sveen said. "Even confident buyers will hold off, I'm afraid."

An increase in home prices is a good sign, but The Washington Post reported that the housing market remains drag on the U.S. economy. During the housing bubble, homeowners were taking out lines of credit on their homes to spend on goods and services. But now that those home values have plummeted, the lines of credit are no longer available, costing the economy $400 billion to $560 billion in consumption spending, Dean Baker of the Center on Economic and Policy Research told the news source.

Another way the housing market is delaying an economic recovery can be seen in the low home prices and backlog of distressed and foreclosed properties in the market. This surplus of low priced housing is decreasing demand for homes and driving home sales down. This is hurting the construction sector in terms of building new homes or renovating existing ones. According to the news source, residential investment averages 4 percent of GDP, but reported a record low at 2 percent last quarter.  

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